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On August 8, 2013, as predicted by BRIDGE TO INDIA, the Gujarat Electricity Regulatory Commission (GERC) dismissed Gujarat Urja Vikas Nigam Limited’s (GUVNL’s) petition seeking a retrospective revision in tariffs for solar projects in the state. The GERC concluded that the petition is ‘not maintained’, however, the GUVNL is free to appeal to the Appellate Tribunal.

Petition was dismissed on the basic premise of delay in appealing for review of the order

Other grounds deeming the contract ‘not maintained’ included ‘non-jurisdiction’, ‘no provision for reopening of PPA’ and ‘incomplete information’

The comprehensive document dismissing the petition will hopefully reinstate some confidence in investors

Last month, GUVNL filed a petition with the GERC asking for a downward revision of tariff from INR 12.54/kWh to INR 9/kWh claiming that actual project costs incurred by developers were significantly lower than initially assumed while determining the tariff.

Our last blog covering this issue emphasized that the dismissal of the petition would be crucial for India’s solar future. (refer). After holding hearings on the 25th of July as well as on the 5th of August to hear out from the 88 respondents, the GERC finally deemed the petition ‘not maintained’. The primary ground for dismissal was cited as the delay in seeking a review. The commission pointed out that as per regulations, an order can be reviewed only when the petition is filed within a period of 60 days, however in this case, GUVNL appealed for a review after more than three years.

In addition to that, the Commission also explained that it does not have the authority to re-negotiate the PPA as requested by GUVNL as this function does not fall under its jurisdiction. Therefore, it stated that ‘the re-determination of tariff as requested from the commission by the petitioner is not warranted’. Further, regarding the revision of tariff and re-negotiation of the PPA, the document (Refer to the document) says that PPAs can be re-opened only for the purpose of incentivizing non-conventional energy projects and not for reducing the incentive. Moreover, the PPAs hold no clause for such a revision of tariffs, unless and until there is an agreement from the developers’ end. It is only a change in legislation can warrant the opening of a finalized PPA.

The GERC also mentioned that the GUVNL had provided the details of only 10 companies that have benefited from the lower costs of project development or have not met the 70:30 debt equity criterion. The information provided is also largely one-sided and no consideration has been given to the views of the developers. Therefore, the case against the developers was considered incomplete. The GERC finally concluded that the petition is dismissedon the above grounds.

This dismissal has provided some relief to the developers but it would take time to restore overall investor confidence, especially in the wake of uncertainty surrounding the other policies in Tamil Nadu and Andhra Pradesh. However, BRIDGE TO INDIA believes that GERC’s comprehensive document dismissing the petition on several lawful grounds will help reinstate the confidence of the investors in due time.